After toppling Sierra, Bonilla, a conservative, imprisoned ex-president Policarpo Bonilla, a liberal rival, for two years and made other attempts to suppress liberals throughout the country, as they were the only group in the country with an organized political party. The conservatives were divided into a host of personalist factions and lacked coherent leadership, but Bonilla made some efforts to reorganize the conservatives into a "national party."

Bonilla proved to be an even greater friend of the banana companies than Sierra had been. Under Bonilla’s rule, companies gained exemptions from taxes and permission to construct wharves and roads, as well as permission to improve interior waterways and to obtain charters for new railroad construction. He would also successfully establish the border with Nicaragua and resist an invasion from Guatemala in 1906. After fending off Guatemalan military forces, Bonilla sought peace with the country and signed a friendship pact with both Guatemala and El Salvador.

Nicaragua’s powerful President José Santos Zelaya saw this friendship pact as an alliance to counter Nicaragua and began to undermine Bonilla. Zelaya now supported liberal Honduran exiles in Nicaragua in their efforts to topple Bonilla, who had established himself as a dictator. Supported by elements of the Nicaraguan army, the exiles invaded Honduras in February 1907. With the assistance of Salvadoran troops, Manuel Bonilla tried to resist, but in March his forces were decisively beaten in a battle notable for the introduction of machine guns into Central American civil strife. After toppling Bonilla, the exiles established a provisional junta, but this junta would not last.

NOTE! Nation data for this war may be inconlusive or incomplete. In most cases it reflects which nations were involved with troops in this war, but in some it may instead reflect the contested territory.